The
independent director system originated in the United States. The emergence of
independent directors in the United States has its profound historical
background. Until the 1970s, board seats in us public companies were largely
held by internal directors. The watergate scandal in the early 1970s prompted
the SEC to require all listed companies to set up audit committees of
independent directors to examine financial reports and control violations
within the company. As late as 1980, the business roundtable and the chamber of
commerce of the American bar association not only required the majority of
board members of listed companies to be independent directors, but also
required the appointment of director candidates to be fully authorized by the
nominating committee composed of independent directors. By the 1990s, the chief
executives of a large number of companies with declining business performance
were swept away by boards run by independent directors. About two-thirds of
board seats in listed companies are for independent directors.

The
company's involvement in political scandals is only an incentive for the
independent director system, and its essential reason lies in the institutional
defects and practical problems of the uncontrollable internal supervision in
the unitary corporate structure in the United States. In the United States, the
corporate structure only consists of the board of directors and the board of
shareholders, and there is no special supervisory organization such as the
board of supervisors. But as insider control becomes more intense, the
supervisory role of the board shrinks. It can be said that the American
independent director system is based on the objective fact that the company is
controlled by insiders. By the modern firm theory, insider control is to point to
in the modern enterprise of two rights separation, managers or legal master
control, in fact, their interests in the company's strategic decision-making
fully embody the company in the United States, although directors elected by
shareholders, but the company's top management can affect the nominations and
the share of internal directors, this makes the senior management as the core
of interest groups can master control board for a long time, so that the board
of directors in determining the company's target and strategic policy inaction,
lose the ability to monitor the operator.

In
American company law, directors can be divided into internal and external
directors. In the case of a dichotomy, external and independent directors are
sometimes used interchangeably. If the three-point method is adopted, the
directors can be divided into internal directors, external directors with
related relations and external directors without related relations. Among them,
only the external directors who are not related can be called independent
directors. Among them, the internal director refers to the director who
concurrently serves as an employee of the company; Related external directors
refer to the external directors who have substantial interests with the
company. An independent director is a director who is not a director of a
listed company and who has no interest with the company and its major
shareholders that may prevent the company from making objective judgments
independently. As the independent director does not hold the same position as
the company's management personnel, the independent director belongs to the
category of external director. In addition, since independent directors do not
have substantial interests with the company, they are different from other
external directors, especially shareholders' representative directors.

The
SEC defines independent directors as those who have no significant relationship
with the company. No "significant relationship" refers to the
situation that the company is not the former executive director and has no
professional relationship with the company; Not an important consumer or
supplier; Not recommended or appointed on the basis of personal relationships;
Having no close personal relationship with any executive director; Having no
significant share or representing any significant shareholder, etc. This is
much the same as stated in the American institute of law's "principles of
corporate governance". One of the biggest characteristics of independent
directors is their independence. This independence is reflected in: first, the
independence of legal status. Independent directors are elected by the general
meeting of shareholders, not appointed or recommended by the major
shareholders, and not the management personnel employed by the company. They
represent all shareholders of the company and the overall interests of the
company, and they cannot have any relationship with the company, its insiders
and major shareholders that affects their independent and objective judgment. Second,
the meaning is independent. Independent directors perform their duties in a
detached manner, supervise senior management, review the performance of the
board of directors and executive directors, and ensure their compliance with
the best standards of conduct; Make independent judgment on the company's
development strategy, performance, resources, appointment of key personnel,
standards of conduct and remuneration, etc.

The
function of independent directors is mainly realized by participating in various
special committees under the board of directors, such as audit committee,
nomination committee and remuneration committee. The existence and composition
of these committees are important indicators of their independence. The New
York stock exchange requires all listed domestic companies to have an audit
committee composed entirely of independent directors. The us stock exchange
also recommends that domestic listed companies set up audit committees and have
at least two independent directors; Nasdaq began requiring listed domestic
companies to have an audit committee with a majority of independent directors
in 1989. By 1992 all listed companies on the New York stock exchange had audit
committees, and 90% of listed companies had compensation committees. 66.7
percent of listed companies have set up nominating committees. The compensation
committee of the audit committee and the nomination committee play the role of
independent supervisor. The audit committee is responsible for periodically
with the company's internal auditors or chief financial officer, to work
together, and make full use of external legal auditors to effectively supervise
the company's financial reporting process, the inspector company internal audit
procedures, detailed discuss the problems in the audit business, collecting
auditors on the audit management advice, assessment of the company's internal
control system. In conclusion, the audit committee mainly conducts financial
supervision on the company. The compensation committee and nomination committee
shall supervise and urge the compensation policies and plans of the internal
directors and managers and the nomination of directors candidates.

To
sum up, we have a few basic understandings about the independent director
system of the United States: the formation of the independent director system
is the improvement of the internal supervision mechanism of the United States
under the unitary model of corporate organization structure. The function of
independent directors is mainly positioned as supervision, and they mainly play
the role of a supervisor within the company, namely the financial supervision
of the company and the supervision of the duties and behaviors of internal
directors and senior managers. The function of independent director depends on
how to guarantee its independence.

In
the 21st century, a series of financial accounting scandals in the United
States initiated by enron and Arthur Andersen not only dealt a major blow to
the capital market of the United States, but also had a direct negative impact
on the American economy. More importantly, it has greatly hurt investors'
confidence. To this end, on July 26, 2002, the United States congress passed
the corporate reform act: sarbanes-oxley act. One of the important corporate
changes was to strengthen the independence of corporate auditing. Make it clear
that the audit committee is the legal supervisory body of the listed company;
To limit the composition of its personnel, stipulating that the audit committee
must be composed entirely of independent directors, with at least one financial
expert; Clarify the role of the audit committee; In order to guarantee the
independence of the independent auditor, the act also stipulates the service
life of the independent auditor, that is, the principal partner of the audit
firm and the audited partner shall be the external auditor of the company for
no more than five years; Strengthen the industry self-discipline of external
audit, established the accounting supervision committee of the listed company,
responsible for the supervision of the audit industry.

Enron
demonstrates that it is difficult for independent directors to be truly
independent. They are often influenced, dominated and even controlled by
management. The board of directors is dominated by the company's management and
the parties concerned. Independent directors do not have residual claims, and
their supervision of the management is limited. The argument that the role of
American independent directors in the governance of listed companies is
untenable.